Pa. budget deal pieces appear to fall into place

MARC LEVY

Tuesday

Jun 29, 2010 at 5:04 PMJun 29, 2010 at 5:06 PM

HARRISBURG (AP) — The final pieces of a Pennsylvania state budget deal appeared to be in place Tuesday in a plan that would balance higher spending on public schools, prisons, pensions and health care against cuts and layoffs in many other areas. Gov. Ed Rendell and legislative leaders finished a handshake deal Tuesday afternoon after spending a week in daily negotiations.

HARRISBURG (AP) — The final pieces of a Pennsylvania state budget deal appeared to be in place Tuesday in a plan that would balance higher spending on public schools, prisons, pensions and health care against cuts and layoffs in many other areas.

Gov. Ed Rendell and legislative leaders finished a handshake deal Tuesday afternoon after spending a week in daily negotiations. They kept many details of the $28 billion budget agreement under wraps while they prepared to brief rank-and-file lawmakers.

If the House and Senate agree, the general appropriations bill could pass both chambers on Wednesday, one day before the start of the new fiscal year, Rendell said. Under that scenario, it would be the first budget passed on time during Rendell's eight years in office.

The governor called the budget frugal and responsible, given the fact that budget negotiators were tasked with patching up the state's second straight recession-driven deficit. Despite a slew of painful cuts in everything from libraries to state parks to health clinics, it protects his top priorities of helping public schools and the state's economy, he said.

"There's no way to do this without inflicting pain, there's no good way to cut a billion dollars from the budget and that's basically what we did," Rendell said. "Under the circumstances, this is the right thing to do."

In February, Rendell initially had proposed a $29 billion budget. But the state's tax collections deteriorated and the Legislature balked at increasing taxes, leaving the term-limited Democrat with more than a $1 billion deficit and little choice but to negotiate spending cuts.

Under the budget agreement, spending would rise about $250 million, or less than 1 percent, from the level in the 2009-10 budget approved in October. It would require no new or higher taxes.

Pennsylvania would spend more than $1 billion on rising costs such as prisons, public pensions and health care for the poor that Rendell said the state has no choice but to shoulder.

Rendell also won most of the increase in funding for public school instruction for which he fought. Spending would rise by $250 million, or 4 percent, on a cause Rendell calls crucial to improving the state's economic future, as well as to help financially strapped school districts avoid layoffs and cutting programs.

The agreement also raises the state's debt level for public construction and civic improvement projects by $600 million, from $3.45 billion to $4.05 billion, a stream of money that Rendell said would help the economy by creating jobs. The debt is repaid by taxpayer dollars. Local government agencies that receive the grants must match them dollar-for-dollar.

In recent days, Rendell has said spending cuts elsewhere in the budget could result in 1,000 layoffs of state government employees. On Tuesday, he said he did not know an exact figure that would be required under this plan.

The lack of a tax increase in the plan was a defeat for Rendell, who had sought to impose a new tax on cigar and smokeless tobacco sales and eliminate various tax exemptions to avoid cuts.

Separately, Rendell and legislators agreed to work on a plan in the coming months to tax the state's rapidly growing natural gas industry. It was not clear Tuesday whether such a plan would contribute tax revenue to the state treasury in the next fiscal year.

Deeper cuts or tax increases would have been required in the budget without the approximately $2.7 billion in expected federal stimulus budget aid. That figure includes $850 million in extended stimulus aid that Rendell had anticipated, but proponents in Congress have been unable to win enough support for the extension.

Rendell and other governors continue to press Congress for the money. However, Rendell said he and legislative leaders may be forced to sit back down soon and devise a strategy to deal with the gap. He has warned that cutting that amount from the budget would result in 20,000 layoffs of public school teachers and government employees at all levels in Pennsylvania.

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